POM Seeks to Prevent Coke From Juicing Sales

The pomegranate juice maker wins the right to sue the beverage giant.

Jun 19, 2014 at 10:09AM

Source: Minute Maid.

It's sad, really, that the best defense Coca-Cola (NYSE:KO) could come up with against charges it was snookering the public with deceptive advertising was that federal law doesn't let competitors file lawsuits against it, since that argument seems to validate the allegations. Perhaps worse for the soda maker is that not even the Supreme Court would buy into the argument. Although the high court didn't weigh in on the merits of the lawsuit, only that the case can proceed in lower courts, it represents a setback for Coke, at least in the court of public opinion.

Pomegranate juice maker POM Wonderful alleges the beverage company's Pomegranate Blueberry juice deceives the public into believing the drink is actually made mainly from those fruits when in reality it's almost all apple juice -- 99.4%, in fact -- with just a smidgen of blueberry and pomegranate added to allow Coke to claim otherwise. 

Coke hasn't answered the charge of whether it's being deceptive, but instead maintains POM is prohibited from bringing a case against it because the federal Food, Drug & Cosmetics Act gives the FDA jurisdiction over labeling, and the regulatory allows beverage names to use the names of the juices providing the flavor, even if those juices don't provide the bulk of the contents.

POM countered that under the Lanham Act, private-party lawsuits are permissible to protect against unfair competition by misrepresentation of products. The juice maker says its own more expensive pomegranate blueberry juice is 85% pomegranate and 15% blueberry, and that the cheaper knockoff is hurting sales.

While the lower courts sided with Coke, the Supreme Court backed POM's case, saying that Congress had ample opportunity to speak on the competing regulations and, having chosen not to, is purposely allowing them to coexist, permitting competitors to bring civil lawsuits to protect their commercial interests, while also protecting public health and safety with FDA regulation. During arguments, Justice Kennedy suggested Coke had "a very difficult case to make" if it was arguing its label was fair to consumers.


Source: POM Wonderful.

That may be, but Coke probably has less to worry about in the courtroom than in the court of public opinion. Over the years, POM has sued other juice makers with similar claims, including PepsiCo, Ocean Spray, and Welch's, but has lost each time. But consumers are becoming more savvy about the foods they're eating and the beverages they're drinking.

Diet soda sales in particular have been rapidly declining because of concerns over the artificial sweeteners they use. According to Beverage Digest, Diet Coke volumes fell 6.8% last year while sales were down 6.9% as it's sold nearly 20% fewer cases of Diet Coke since 2007. Not even regular Coke has escaped the implosion, falling by around 10% over the same period.

Now as it becomes more widely publicized that its so-called pomegranate blueberry juice is virtually neither, containing just 0.3% of the former and 0.2% of the latter, consumers may feel indignant that they've been tricked.

Of course, POM Wonderful knows something about deceptive advertising, too, as the FDA and the FTC are pursuing it for health claims it's made about the benefits of pomegranates, saying they're not supported by science.

Regardless of how the court case turns out, Coca-Cola's attempt to juice sales by playing fast and loose with its labeling could cause consumers to sour its sales.

Warren Buffett's biggest fear is about to come true
Warren Buffett just called this emerging technology a "real threat" to his biggest cash-cow. While Buffett shakes in his billionaire-boots, only a few investors are embracing this new market which experts say will be worth over $2 trillion. It won't be long before everyone on Wall Street wises up, that's why The Motley Fool is releasing this timely investor alert. Click here to learn more about what's keeping Buffett up at night and the one public company we're calling the "brains behind" the technology.

Rich Duprey has no position in any stocks mentioned. The Motley Fool recommends Coca-Cola and PepsiCo. The Motley Fool owns shares of PepsiCo and has the following options: long January 2016 $37 calls on Coca-Cola and short January 2016 $37 puts on Coca-Cola. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of fool.com.

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to www.fool.com/beginners, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at www.fool.com/podcasts.

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.

Compare Brokers